Monetary Economics (ECS3701) Selected Examination Questions and suggested solutions 2023

Assets are things that are useful or things that have value. T or F. - -True -One of the most important prices determined in financial markets is the __________________ rate. - -interest -When a coffee shop lists a tall coffee on its menu at $2.95, the coffee shop is using money as a - -unit of account -Mandy goes to the grocery store to buy groceries, and at the checkout counter she pays cash. this is an example of money being used as - -medium of exchange -money that has no intrinsic value is known as - -fiat money -Bonds are issued by - -many kinds of borrowers -the face value of a bond is the - -original amount of money borrowed by the bond issuer -A bonds maturity refers to the - -period of time when the issuer of the bond makes repayment of the bonds principal -bond prices and interest rates are - -inversely related -the market for bonds is a subset of the market for loanable funds. T or F - -T -the Risk that a bond issuer will not be able to live up to the promise they make when they issue a bond is known as ... - -default risk -the rate at which a lender needs to be compensated for taking on greater risk is known as .... - -default risk premium -a major disadvantage that municipal bonds have over corporate bonds for investors is that - -the income earned on municipal bonds is not subject to federal income tax -an inverted yield curve likely means the - -economy is headed for recession. -an inverted yield occurs when - -long-term interest rates are lower than short term interest rates -the primary lesson learned from the panic of 1907 was the - -need in the United States for a central bank -a major concern of US policymakers as a result of the dramatic increase in wartime spending was - -inflation -the expansion of the junk bond market in the 1980's was one factor that allowed for the rapid increase in the number of leveraged buyouts. T or F - -T -______________ predicted that capitalism would fail under the weight of growing unemployment. His economic ideas formed the basis for the system adopted by the soviet union. - -Karl Marx -Aggregate demand is equal to - -C + I + G + (X-M) -With a two part aggregate supply curve, an increase in aggregate demand when the economy is at less than full employment will lead to _________ in real GDP and __________ in the price level. - -an increase; no increase